WELCOMING FINANCE TO THE SUPPLY CHAIN FOLD With supply chain and logistics moving from a back of house function to its current role as a major strategic contributor, organisations are under pressure to deliver robust cash strategies that supports the growth and stakeholder objectives, thus has evolved the role of Supply Chain Finance writes Darryl Judd, COO of the Logistics Executive Group

1. !
CEO EXECUTIVE SERIES!
24 FEBRUARY 2014
WELCOMING FINANCE TO
THE SUPPLY CHAIN FOLD
With supply chain and logistics moving from a back of
house function to its current role as a major strategic contributor, organisations are under pressure to deliver robust cash strategies that supports the growth and stakeholder objectives, thus has evolved the role of Supply
Chain Finance writes Darryl Judd, COO of the Logistics
Executive Group
NEWS & EVENTS
Upcoming Event
LogiSYM 2014 - Singapore
Logistics Executive Group is pleased to
partner with LOGISYM 2014 and invites
you to register for Asia's premier supply
chain conference, being held in Singapore
March 26-27th 2014. LOGISYM promises
to be a highly unique event, with the
focus being to provide a platform for mid
to senior level shippers to hear from the
leading solutions providers in the
industry. !
www.LOGISYM.com "
Logistics Executive
Global News
World’s largest Economic Trade
Free Zone Appoints Logistics
Executive Group as Country
Representative for Australia & NZ
It
has been mentioned time-over how the GFC completely
changed the way we do business. In particular how supply
chain and logistics went from being the support function
back of house to its present role as a major strategic
contributor with a well-earned place on the executive team. !
One of the key reasons for this is the advantage that the
Supply Chain and Logistics function offers. Its logical,
business agility provides the real-time competitive edge
when responding to market forces. !
The supply chain process draws in all functions of the
business at every level. In this article, we are going to look
at how the finance function has been influenced by supply
chain and how this evolving partnership has accelerated the
emergence of what is known as the financial supply chain to
the forefront of the accounting profession.
© 2014 LRS Group Pty. Ltd. All rights reserved!
Dubai Government owned Jebel Ali Free
Zone (Jafza www.ezw.com), the world’s
largest economic free zone, has appointed
Logistics Executive Group as announced
the appointment of Logistics Executive
Group as Country Representatives for
Australia and New Zealand. Jafza is the
world’s preeminent tax free zone hub for
manufacturing, oil and gas,
construction, industrial, logistics and
supply supply chain import, export and
re-export hub and the global trade /
access hub to UAE, GCC, Africa and CIS
countries”. Logistics Executive Group
Global CEO Kim Winter said that “well
over 100 Australian and New Zealand
businesses currently enjoy unparalleled
business facilities and tax free advantages
within the Jafza environment, having been
an active participant in the UAE economy
since opening an office in Dubai 10 years
it’s been exciting to be part of the massive
regional development and it’s a genuine
honour for us as a global business to be
appointed as representatives for Jafza as a
jewel in the crown of Dubai and the UAE
downunder”.!
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2. !
CEO EXECUTIVE SERIES!
24 FEBRUARY 2014
With the supply chain lengthening as a result of
globalization and offshore production, many
companies experience a reduction of capital
availability. !
In addition, the pressure faced by companies to
improve cash flow since the GFC has resulted
in increased pressure on their overseas
suppliers. Specifically suppliers receive
pressure in the form of extended payment
terms or increased working capital imposed on
them by large multi-national buyers. !
The general trend toward open account from
letters of credit has further contributed to the
problem. !
Particularly during the turbulence of the GFC
and the proceeding years, there has been an
ongoing focus on ensuring that cash flow and
capital management are protected. !
The reason for this according to John Mardle,
Managing Director of CashPerform Limited
says is simple. “Analysis of where cash is
actually coming from (O2C) and where it is
going to (P2P), and in particular the timing, the
value and the accuracy of each cash transaction
in each scenario will determine whether an
organization is sustainable by way of cash in
the future”.!
Obviously, this information, which amounts to
the health check of the business, was as critical
at the time of the GFC as it is today.!
Since the GFC, businesses have also realized
that the financial supply chain can provide
invaluable analysis and depth to issues like:!
• Strategy regarding customers, suppliers,
stakeholders and employees when
delivering cash conversion cycle efficiency!
• Operational metrics that reflect the real
drivers of working capital.!
• Alignment and cross-functional team
working required delivering a sustainable
financial supply chain.!
The opportunities for global supply chain
finance solutions are significant. The total
worldwide market for receivables management
is US$1.4 trillion. !
Payables discounting and asset-based lending
add an additional US$100 billion and $350
billion, respectively. Only a small percentage of
companies are currently using supply chain
finance techniques, but more than half have
plans or are investigating options to improve
supply chain finance techniques.!
While buyers are extending payment terms to
their suppliers, the suppliers often have limited
access to short-term financing and, therefore, a
higher cost of money. !
This cost-shifting to suppliers results in a
financially unstable and higher-risk supply
base. !
Overall, the benchmark reports showed that
companies should be pursuing three key areas
of improvement: global supply chain financing;
supply chain technology; and upstream and
downstream supply chain visibility.!
!
TRAINING AND STAFF PERFORMANCE
Logistics Executive in conjunction with partners is committed to providing the most
relevant and cutting-edge Supply Chain, Logistics & Executive development to
your employees upgrading their future skills and helping to retrain. Our short and
long-term courses include industry specific seminars, tier one accredited courses,
and on-site customised training developed for Supply Chain and Logistics employers. Logistics Executive Training Academy provides Quality Training and Development for companies and organisations that meet their individual needs. We provide training and assessment services that are relevant,
flexible and of the highest quality.
More Information on Logistics Executive
Academy Training and Development Programs
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3. !
CEO EXECUTIVE SERIES!
24 FEBRUARY 2014
However, for an organization to successfully
integrate their supply chain and finance
functions they need to employ the use of good
system integration and excellent leadership and
people management skills. !
commercial visibility in an organization at all
levels, there needs to be cooperation amongst all
functional silos.
All touch points and
perspectives, including financial, customer and
internal need to be investigated in order to get
In terms of systems, there needs to be an an understanding of the organization as a whole.!
enhancement of the real-time advantage of Financial Supply Chain professionals can
enterprise resource systems and customer combine a variety of systems, accounting tools
relationship management systems to build in as and business nuance to devise tailored solutions
much automation to the financial process as for individual commercial circumstances. !
possible. One of the ways to achieve this is An example of how Financial Supply Chain can
through a simple scanning process. Automating be tailored is Sainsbury’s use of activity based
the debt and billing processes as well as
costing for benchmarking suppliers as part of
creating business intelligence tools to
a value chain analysis. !
monitor company performance all
They analysed suppliers into three
contribute to the increased visibility of
categories depending on the volume
company performance. !
they delivered and the
Of course, the human
factor is also critical.
“General business
knowledge, leadership
aptitude and strong
interpersonal skills are
the new most sort after non
traditional traits recruiting
managers are now looking for
in finance and accounting
professionals” said Carmel
Perales, South East Asia Head
of Logistics Executive.
There
needs to be a human oversight that can manage
and counter balance the impact and flow on of
information and strategy shifts to the business as
a whole. !
strategic importance of
their products to
Sainsbury’s. The three
categories were
suppliers, middle to
large suppliers, and
small suppliers. Activity
based costing information
was developed – mainly
with core suppliers – to
provide benchmarking data
and to identify development
opportunities.
There are many
examples like this in which Financial Supply
Chain can apply accounting techniques to create
commercial value. !
Since the GFC the supply chain accounting
process has perfected many techniques to
optimize resources within the supply chain
model. These extend to areas such as: costing,
benchmarking, outsourcing and performance
measurement, which range well beyond the
scope of traditional accounting. !
Physical and informational control are the keys
to a robust global supply chain finance solution.
Closer collaboration between logistics providers
and financial services firms will in future assist
developing precise visibility tools that provide
CFOs and global supply chain managers with
the data they need and lenders with the
collateral security required to provide capital. !
The incentive for finance to collaborate with its
supply chain partners in the financial process is
clearly obvious. It lies in the challenge to drive
the change process in support of the
organization’s strategic intentions.
To gain
The starting point for information about goods
being transported must be the entity that is
transporting the goods – the supply chain
services provider, transportation company, and/
or logistics partner.!
© 2014 LRS Group Pty. Ltd. All rights reserved!
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4. !
CEO EXECUTIVE SERIES!
These are the entities that have
the physical control of the
goods while in the supply
chain. Access to this
information is a must from a
demand planning perspective.
Knowing where the goods are
in transit, the financial services
provider can more confidently
extend financing at various
milestones within the supply
chain.!
There the critical role to this
equation is that of the supply
chain finance “translator” – the
department or entity
responsible (and experienced)
in both logistics/transportation
and financial services. The
translator is the subject matter
expert that can bring all entities
to the table – transportation
and logistics; banks; buyers;
and sellers and speak the
various languages and
understand the needs of each
party. Thus evolves the role of
Supply Chain Finance and
whom can help bridge the
information divide between the
physical and financial worlds,
providing critical analysis
24 FEBRUARY 2014
about the information being
collected from the supply chain. !
In conclusion, the financial
supply chain is unique to every
organisation and requires a
complete understanding of the
processes in each part of the
chain. This will deliver the
robust cash strategy that
supports the organisation's
ability to service its debt and to
gain competitive advantage. !
In today’s global markets, it is
more crucial than every to have
this competitive advantage. !
Everyday business activities can
involve thousands of processes,
systems and individuals. When
these activities are efficiently
managed and coordinated across
the enterprise, powerful
synergy results. By integrating
the finance function with
supply chain and therefore the
rest of the organization, much
greater visibility is achieved
and as a result significant cost
and timesaving’s can be gained.
Logistics Executive
!www.logisticsexecutive.com
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For a copy of the
2013-2014 Logistics
Executive Global
Employment Report
email: !
darrylj@logisticsexecutive.com
or !
kimw@logisticsexecutive.com
AUTHOR PROFILE:
MR DARRYL JUDD, CHIEF OPERATING OFFICER & MANAGING
DIRECTOR ASIA!
LOGISTICS EXECUTIVE GROUP!
With more than 20 years' of executive management experience in the Human
Resources Consulting, Aviation and Supply Chain industry, his expertise includes
driving business performance, consulting, executive search, designing business
strategy, supply chain alignment, organisation structure, performance management,
mergers & acquisitions, change management and HR talent design. With a degree in
Economics, Darryl is considered to be a specialist in the linkage of business strategy
and supply chain best practice to human capital management. He has held senior
executive positions within airline and major logistics organizations and is regularly a
contributor on thought leadership across numerous publications, a frequent speaker
at international conferences and events on business leadership, strategy & people
alignment and talent management. Email: DarrylJ@logisticsexecutive.com
© 2014 LRS Group Pty. Ltd. All rights reserved!
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